Retirement 101 – the Sep Retirement Plan

As the owner of a small company , deciding on a Sep retirement plan can be an easy and great way to provide retirement benefits for your employees. Eligible employees will be at least 21 years of age and have worked for the company three of the past five years. You are not required to contribute to the Sep every year. Contributions can be made at the percentage and frequency the business owner prefers , but must be uniform for all participating employees. The limit on contributions is the lower of 25% of the employee’s annual compensation or $49,000 annually . A Sep retirement plan is normally not required to file annual reports with the government, making it easy for many small businesses to adopt. When the employees participate in a Sep retirement plan they must get certain key documents from the business owner and/or the financial institution serving as trustee for the accounts. These will include an overview of how the SEP operates, a statement on their account reporting fair market value of the investments, and information about the terms of the program explaining how changes are made to the plan and when employees are to receive information about contributions to their plan. When new employees become eligible to participate, they also must receive the written information. Participants cannot take loans from the Sep retirement plan, but are able to do a tax-free rollover into another traditional IRA, another SEP account, and even into another employer’s qualified retirement plan. Normal withdrawals from the Sep retirement plan can begin as early as age 59 ½ years old. Taking disbursements prior to that could result in an additional 10% penalty fine . Required distribution from the account must begin at age 70 ½ years old. A Sep retirement plan offers a simple solution for many small companies hoping to offer retirement benefits for their employees and enjoy those benefits themselves. It’s easy to administer, low-cost to operate, and beneficial to everyone .